Health Net Fined, Billed for Rescission

One of Los Angeles’s biggest health insurers agreed on a $25 million settlement with state regulators to rectify its ways of dropping health insurance coverage of patients when they apply to use their policies.

Health Net Inc. offered new health coverage for its 926 clients that were dropped from family or individual policies since 2004.

Part of the settlement agreement with the California Department of Insurance was Health Net’s pledge to pay $14.2 million in outstanding medical bills.  Health Net will also have to waive $7.2 million in premium payments and pay a hefty fine of $3.6 million.

The formal announcement of the settlement agreement will be made on Friday by Insurance Commissioner Steve Poizner.  

Health Net Does Not Acknowledge Wrongful Act

 
Jay Gellert, chief executive of Health Net said that the company is not acknowledging any wrongful act and does not agree with the accusations hurled on them.  Gellert however added that Health Net is taking advantage of the settlement so that the company can move forward and provide coverage for affected individuals.

Poizner pointed out that the example provided by Health Net in broadly changing rescission and underwriting could serve as a model for other companies providing health insurance coverage.

The Department of Insurance spokesperson, Jason Kimbrough, said that the settlement agreement compels Health Net to improve their performance in collecting medical information before issuing any policy.  Health Net also agreed to notify clients when their applications are undergoing review.  The insurer must also look for a third party entity that will review the decisions on future rescissions.

Understanding the Meaning of Rescission

When an insurer drops patients from their coverage when a claim on it has been attempted, the insurance industry calls it rescission.  The practice has been the subject of much controversy as many people accused insurance agencies of improperly applying it on claimants.  State regulators have engineered many settlements with top insurers and compelling them to pay millions of dollars in fines and penalties.  Insurers are also instructed to restore the coverage of their clients.  

State regulators rebuked Health Net for its practice of giving bonuses to analysts who will cancel health coverage.  On the other hand, Health Net said that policy holders failed to disclose existing medical conditions thus resulting to rescission.

Health insurers have been virulently criticized for dropping policies based on very minor errors or honest mistakes of their clients especially when medical bills are coming in.   The company was penalized by state Insurance regulators for misleading investigators looking in their rescission practices.  Health Net paid $1 million as fines.
Health Net is also in a legal brawl with the Los Angels City Attorney for allegations of fraudulent practices and still fights it in state court.